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CIRCULAR No

CIRCULAR No. 19/1999/TT-BTC OF FEBRUARY 9, 1999 GUIDING THE EXPERIMENTAL APPLICATION OF FINANCIAL REGIMES IN A NUMBER OF BORDER-GATE AREAS OF CAO BANG PROVINCE

Pursuant to Decree No.178/CP of October 28, 1994 of the Government defining the tasks, powers and organizational structure of the Ministry of Finance;

Pursuant to Decision No.171/1998/QD-TTg of September 9, 1998 of the Prime Minister on the experimental application of a number of economic development policies in a number of border-gate areas of Cao Bang province;

The Ministry of Finance hereby guides the experimental application of financial regimes in a number of border-gate areas of Cao Bang province, as follows:

I. THE OBJECTS AND SCOPE OF APPLICATION

1. Scope of application:

According to provisions of Article 1 of Decision No.171/1998/QD-TTg of September 9, 1998 of the Prime Minister, the scope of experimental application of a number of financial policies stipulated in this Circular includes:

a/ The Ta Lung national border-gate area, including Ta Lung border gate and Ta Lung commune of Quang Hoa district;

b/ The Hung Quoc border-gate area, including Hung Quoc border gate and Hung Quoc commune of Tra Linh district;

c/ The Soc Giang border-gate area, including Soc Giang border gate and Soc Giang commune of Ha Quang district.

The areas mentioned in Points a, b and c above shall herein collectively referred to as Cao Bang border-gate economic areas.

2. Objects eligible for preferences:

Eligible for financial preferences provided for in this Circular are domestic and foreign investors that invest in production, business and infrastructure construction in Cao Bang border-gate economic areas in conformity with the Law on Domestic Investment Promotion and the Law on Foreign Investment in Vietnam, more concretely:

a/ Domestic investors include enterprises of all economic sectors established under the provisions of the Law on State Enterprises, the Law on Private Enterprises, the Law on Companies, the Law on Cooperatives,...

b/ Foreign investors include foreign-invested enterprises, foreign investors to the business cooperation contracts, overseas Vietnamese investing in the country in the forms prescribed in the Law on Foreign Investment in Vietnam, and foreign investors conducting business activities not under the Law on Foreign Investment in Vietnam.

Domestic and foreign investors investing in Cao Bang border-gate economic areas, which do not set up economic legal entities, shall have to separately account their business activities in the areas to serve as basis for the determination of the preferential regime.

Only production and business activities conducted in Cao Bang border-gate economic areas shall be eligible for the preferential regime.

II. SPECIFIC GUIDANCE

A. LAND AND WATER SURFACE RENT PREFERENCES; TAX PREFERENCES

1. Land and water surface rent preferences:

Domestic and foreign investors that invest in production, business and infrastructure construction in Cao Bang border-gate economic areas, when renting land and/or water surface shall, besides the exemption or reduction entitlements under the current regulations, enjoy 50% land or water surface rent reduction as compared with the land or water surface rent rates currently applied in the Cao Bang border-gate economic areas, in conformity with the current regulations on determination of land or water surface rent rates.

2. Preferences of tax on transfer of incomes abroad and other taxes:

a- Regarding tax on transfer of incomes abroad:

Incomes earned by foreign investors from their investment activities in the Cao Bang border-gate economic areas (including the reimbursed income tax amount and the income earned from capital transfer), when being transferred abroad or kept outside Vietnam, shall be subject to tax on transfer of incomes abroad at the lowest tax rate of 5% in the tax bracket prescribed by law.

b- Regarding other taxes:

Other taxes, fees and charges shall comply with the current stipulations in the tax laws, the Law on Domestic Investment Promotion (amended), the Law on Foreign Investment in Vietnam and other legal documents.

3. The order and procedures for enjoying investment preferences:

The order and procedures of applying for investment preferences provided for in this Circular shall comply with the current regulations on the order and procedures of applying for the land and water surface rent preferences and tax preferences provided for in the current documents on land and water surface rental, and on tax regime.

B. PROVISIONS ON DOMESTIC AND OVERSEAS CAPITAL MOBILIZATION

- The domestic enterprises and foreign-invested enterprises investing in production and business development as well as infrastructure construction in the Cao Bang border-gate economic areas shall be entitled to mobilize capital from all domestic and overseas sources in appropriate forms such as bank loans, loans from organizations and individuals, issuance of enterprise bonds..., according to the current provisions of laws in order to create capital sources for business development.

- The People�s Committee of Cao Bang province shall, within its function, tasks and powers, be entitled to apply the appropriate forms of mobilizing capital for construction of infrastructure projects in Cao Bang border-gate economic areas, such as: issuance of lottery of special kinds, issuance of project bonds under the Government�s permission or mobilization of public-utility labor of the people... according to the current provisions of laws.

C. PROVISIONS ON MANAGEMENT OF THE STATE BUDGET INVESTMENT CAPITAL FOR INFRASTRUCTURE CONSTRUCTION AND DEVELOPMENT IN CAO BANG BORDER-GATE ECONOMIC AREAS

1. Drafting estimates of investment capital for the Cao Bang border-gate economic areas:

Annually (in the 1999-2002 period), basing itself on the State budget revenue estimates of the Cao Bang border-gate economic areas, which have already been ratified by the People�s Council of Cao Bang province and agreed on by the Ministry of Finance in the annual budget estimates of Cao Bang province, the People�s Committee of Cao Bang province shall propose the State capital amount to be annually channeled through the provincial budget exclusively for the Cao Bang border-gate economic areas (for every specific investment project, classified into groups and put in priority order) to the Ministry of Planning and Investment and the Ministry of Finance for consideration.

On the basis of State budget estimates of the Cao Bang border-gate economic areas and at the proposal of the People�s Committee of Cao Bang province, as well as the general balance of the annual State budget, the Ministry of Finance shall determine the total State budget capital to be separately invested each year in the Cao Bang border-gate economic areas which shall not be lower than 50% of the total State budget revenues collected in the Cao Bang border-gate economic areas. Such investment capital amount shall be allocated by the Ministry of Finance to the People�s Committee of Cao Bang province through the Finance and Pricing Department of Cao Bang province, for investment in the Cao Bang border-gate economic areas.

The Ministry of Planning and Investment shall reach an agreement with the Ministry of Finance on the investment capital for each project of Group A and Group B, the total investment capital and other relevant matters before issuing the decision to ratify the investment estimates for the whole 1999-2002 period and the annual State budget investment capital estimates allocated to Cao Bang province.

Basing itself on the Ministry of Planning and Investment�s announcement on each year�s investment capital amount to be allocated from the Central Budget to the Cao Bang border-gate economic areas, the People�s Committee of Cao Bang province shall have to draft the estimates for the use of investment capital in each quarter, then send it to the Ministry of Finance (on the 20th day of the last month of the preceding quarter at the latest).

On the basis of the investment capital estimates for the whole year and the estimates for quarterly use of capital drafted by the locality and the Central Budget�s capability at each point of time, the Ministry of Finance shall determine and announce the quarterly estimates of capital allocation to the People�s Committee of Cao Bang province.

The capital amount invested by the State in the Cao Bang border-gate economic areas through the provincial budget shall be determined on the basis of the annual estimates of budget revenues to be collected in the Cao Bang border-gate economic areas (excluding revenues not assigned in the budget balance, such as school fees, hospital fees, aids, people�s contributions,...) and shall be revised in the following year on the basis of the preceding year�s actually collected amount which shall be incorporated into the following year�s investment capital estimates; the difference between the actually collected amount and the estimated revenue at the beginning of the year shall be included in the following year�s investment capital estimates. Such investment capital shall be considered target support from the Central Budget to the province and shall not be accounted in the spending tasks of the local budget.

2. Allocation mode, reporting regime, final settlement of accounts and management of investment capital for the Cao Bang border-gate economic areas:

According to the investment capital use estimates for the whole year and each quarter already ratified, the Ministry of Finance (the Central Budget) shall allocate capital to the approved investment projects through Cao Bang province�s budget.

All capital amounts allocated by the Central Budget to the Cao Bang border-gate economic areas through the provincial budget shall be used only for purpose of constructing infrastructure projects in the Cao Bang border-gate economic areas according to the Cao Bang border-gate economic areas� master plan already approved by the competent authority and shall have to be managed strictly according to the current regulations on investment and construction.

The investment capital for the Cao Bang border-gate economic areas through the provincial budget shall be collectively reflected in the monthly budgetary reports and annual budgetary settlements of the locality with a part separately recorded for investment projects in Cao Bang border-gate economic areas (including capital source separately allocated by the State budget and that mobilized by the province).

Quarterly, the province shall report to the Ministry of Finance and the Ministry of Planning and Investment on the implementation of construction investment, and capital allocation to each project, and at the year�s end, report to the Prime Minister (concurrently to the Ministry of Finance and the Ministry of Planning and Investment) on the whole year�s performance results.

3. The management, allocation and settlement of investment capital for each project in the Cao Bang border-gate economic areas shall comply with the current regulations of the State.

III. IMPLEMENTATION ORGANIZATION

This Circular takes effect from January 1st, 1999. All previous stipulations on the financial regime already applied in the Cao Bang border-gate economic areas, which are contrary to this Circular are now annulled.

Domestic and foreign investors that have invested in the Cao Bang border-gate economic areas before the effective date of Decision No.171/1998/QD-TTg of September 9, 1998 of the Prime Minister shall, as from the effective date of this Circular, be entitled to the investment preferences provided for in this Circular.

Any problems arising in the course of implementation shall be reported to the Ministry of Finance for study and settlement.

For the Minister of Finance

Vice Minister

TRAN VAN TA